The following item is a Letter of Intent of the government of Tajikistan, which describes the policies that Tajikistan intends to implement in the context of its request for financial support from the IMF. The document, which is the property of Tajikistan, is being made available on the IMF website by agreement with the member as a service to users of the IMF website.

1. The Government of Tajikistan is implementing a program of economic reform
with support from the IMF's Poverty Reduction and Growth Facility (PRGF).
The Executive Board of the IMF approved a third annual arrangement under
the PRGF on October 25, 2000. Together with an IMF mission that visited
Dushanbe during January 30-February 15, 2001, we conducted a review
of the implementation of the economic program supported by the third annual
arrangement. In the following paragraphs, we assess the macroeconomic
and financial performance of recent months and our efforts to implement
the macroeconomic stabilization and structural reform policies specified
in the program. Based on this assessment, we then describe the specific
measures that we will take to keep the overall program on track and to
further the economic reform process in Tajikistan.

2. Despite a drought that affected mainly rain-fed wheat production,
economic growth increased to more than 8 percent during 2000. This strong
performance was due to increased industrial production—led by the
aluminum sector—and strong growth in the agricultural sector, especially
cotton and fruit production. Inflation, however, was significantly higher
than expected in the last quarter of 2000, with the consumer price index
increasing cumulatively by about 21 percent during October-November. We
attribute this rise of prices to uncertainties associated with our otherwise
successful currency reform introducingthe Somoni, the failure
to control liquidity as well as external factors. In December, we
began addressing this problem by pursuing a substantially tighter fiscal
policy than called for under the program. During December and January,
inflation moderated. Despite an improvement in the prices for our major
exports during 2000, the balance of payments remained under pressure.
This was largely due to the need to import large amounts of wheat and
a significant increase in world energy prices.

3. All of the quantitative performance criteria for end-December 2000
under the program were met, with the exception of that for net domestic
assets (NDA) of the National Bank of Tajikistan (NBT). Difficulties enforcing
loan collections combined with the deterioration in the income position
of the NBT contributed to the excess liquidity. Further, because progress
with the implementation of key structural reforms envisaged under the
program was slower than expected, particularly in the area of land reform,
some of the structural benchmarks for end-December 2000 were not met.

4. During January 2001, the NBT substantially improved its efforts to
collect loans from the cotton sector and Tajik Rail. Furthermore, execution
of the 2001 budget proceeded cautiously on the expenditure side, while
tax revenue collection was particularly strong thereby contributing to
a significant build-up of government deposits at the NBT. As a result,
we met the NDA target set for end-December 2000 by end-January 2001. We
intend to continue our macroeconomic adjustment efforts and to bring the
pace of implementation of structural reforms back on track in order to
enhance their positive impact on the economy. On this basis, we are requesting
a waiver for the non-compliance with the performance criterion on NDA
of the NBT (we are also requesting one additional waiver for non-compliance
with a performance criterion and a modification of the end-March 2001
performance criterion as discussed below). This would allow completion
of the first review under the current program and permit access to the
scheduled quarterly loan disbursement based on the end-December 2000 outcome.
A more detailed discussion of salient policy issues and measures to improve
program performance is provided below.

5. Fiscal policy. Consistent with our revised stabilization targets,
the overall nominal cash deficit in 2001 will be unchanged from that included
in the budget law of December 8, 2000. Our estimates of tax revenue and
expenditures have been revised to reflect the higher than expected inflation
in the latter part of 2000 and the depreciation in the nominal value of
the exchange rate. Accordingly, without any change in policies underlying
the 2001 budget, we are now projecting total revenues (including grants)
in 2001 of Sm340.7 million which excludes payments from the NBT under
the regularization agreement. Total expenditures and loans (minus repayments)
in 2001 are projected to be Sm353.1 million, which also excludes payments
to the NBT under the regularization agreement. Strong revenue collections
since the beginning of the year reduced our projected budget deficit for
the first quarter of 2001 to Sm5.3 million.

6. With a view to sustaining the tax revenue effort of early 2001 and
enhancing the transparency of our fiscal activities, we will issue a government
resolution specifying the revised revenue and expenditure targets for
the 2001 budget no later than June 30, 2001. Article 23 of the Budget
Law for 2001 authorizes the Ministry of Finance to fund additional expenditures
in the event of higher revenue collection (within an unchanged overall
deficit). The proposed resolution will be submitted to Parliament forinformation.

7. In order to strengthen our fiscal performance and the quality of governance
pertaining to budgetary matters, we plan to enhance the effectiveness
of our treasury system. We have established regional treasuries in the
remaining six rayons as indicated in the Memorandum of Economic Policies
that we submitted in October 2000 to the Managing Director of the IMF.
Further, the parliament approved the treasury law and we have extended
the coverage of the treasury to all government payments outside Dushanbe.
At the same time, we have begunimplementation of a pilot project
in four ministries designed to enhance expenditure commitment control.
Additional measures we plan to take include abolishing the treasury single
extrabudgetary account, publishing and distributing the treasury manual,
and consolidating the bank accounts of individual ministries.

8. We have continued workingon improving tax administration with
the support of technical assistance from the Fiscal Affairs Department
of the IMF. During 2001 we plan to (1) improve operation of the VAT by
enforcing the use of tax invoices by taxpayers, for which return forms
will be made available by the Tax Committee; (2) ensure that funds are
available for producing essential forms and pamphlets required by the
Large Taxpayer Inspectorate and to retain and attract suitably qualified
staff; and (3) give priority to recruiting and retaining the computer
programmers necessary to complete the computerization project at the Tax
Committee.

9. Our plans to begin implementing the agreement between the Ministry
of Finance (MOF) and the NBT aimed at regularizing their financial relations
along the lines spelled out in Annex III of the Government's Memorandum
of Economic Policy of October 2000, were delayed because
of the need to consider various technical issues and safeguards. The government
approved the agreement on March 16 under which Sm3 million in NBT loans
to the government are to be replaced by treasury bills carrying the
market determined interest rate, and, the rest of loans, totalling to
Sm89 million are to be converted into long-term government bonds.
An additional US$32 million of NBT loans to state entities, once
clarified are to be converted into long-term bonds. In addition, the NBT
started paying interest on government deposits. The implementation of
the agreement is to begin immediately and issuance of these treasury bills
and long-term bonds will be completed by end-June 2001.

10. Monetary Policy. We recognize that the implementation of
a strict monetary policy remains a pre-condition for the stability of
prices and the nominal exchange rate. We intend to sustain the substantial
tightening of monetary conditions achieved in January and February as
part of our strategy to restore price stability consistent with our commitments
under the program. We also plan to intensify our use of interest rates
as a tool of monetary policy. We have met NDA and NIR targets for end-February
as discussed with the mission that visited Dushanbe in early February.
We will continue our efforts to meet the performance criteria set for
end-March under the program.

11. There is a major risk that liquidity will again increase in weeks
ahead, as the MOF is expected to draw down its deposits with the NBT as
part of the execution of the budget. Although the strong performance of
the budget thus far in 2001 should limit the size of this draw down, the
NBT will need to contain the expansion of reserve money and offset the
impact on net domestic assets of the NBT. Necessary measures would include
further loan collection, as well as the sale of NBT certificates of deposit
and treasury bills.

12. Under our monetary program, the NBT's claims on the private sector
are projected to decline by Sm24.7 million between end-January and end-March
2001. From end-March to end-June 2001, theNBT's claims on the
private sector will remain unchanged. This means that credit collected
by the NBT would be available for lending to the private sector during
the second quarter of 2001 and this credit would only be extended through
transparent credit auctions.

13. Financial sector reform. The bank restructuring agreements
between the NBT and the four largest commercial banks that were signed
in May 2000 are under implementation. Each of the four banks has prepared
a business plan for achieving improved financial and operational effectiveness.
The banks have shown various degrees of progress in the areas of profitability,
transparency, and recovery of non-performing loans. The banks' planning
expertise continues to evolve, but still needs improvement. Following
a review of progress midway through the restructuring period (July 2000-June
2001), we have amended the business plans in accordance with the recommendations
of Fund staff and in consultation with the banks. We plan to withhold
judgment on the next steps regarding these four banks until the restructuring
agreements expire, but we realize that two of these banks, the Amonat
Bank and the Agro-Invest Bank may require more fundamental restructuring
as part of an overall strategy to develop a banking system that is responsive
to the needs of the economy. The strategy will be prepared in consultation
with Fund staff and will be completed by end-September 2001 (Annex II).
Regarding the other banks outside the restructuring program, we have already
begun the process of revoking the banking licenses or effecting mergers
of 2 banks that had not met the minimum capital requirement of US$1 million
as of end-December 2000.

14. In order to improve the regulatory environment for commercial banks,
we plan to submit to parliament, no later than April 30, 2001, amendments
to the existing legislation that will (1) eliminate the obligation
of commercial banks to report automatically information on new deposits
to the Tax Committee; (2) eliminate the 30 percent tax (specified in Government
Resolution 583 dated November 29, 1993) on transfers from abroad; and
(3) change the present practice such that the Tax Committee assesses the
property tax on the fixed assets of the commercial banks instead of on
the net worth of banks. By end-June 2001, we will adopt a government resolution
or will pass an amendment to the existing laws allowing average foreign
equity ownership of the banking system as a whole to increase to a maximum
of 40 percent in 2001 and 50 percent in 2002. Finally, by end-June we
will amend Article 104 of the tax code to prevent the tax authorities
from reviewing customer accounts when conducting corporate reviews of
the commercial banks.

15. Management of the foreign exchange market. We have recently
taken steps to improve the efficiency of the interbank foreign exchange
market. As a result, the gap between the interbank and official exchange
rates has been eliminated and the gap between the official and the street
(cash) exchange rates has been reduced. We are taking steps to strengthen
the operations of the interbank foreign exchange market by improving the
flow of information, including the reporting requirements of banks. We
will now set the official exchange rate as a weighted average of
exchange rates at which actual interbank transactions take place. Information
on each day's transactions in the interbank market will be made available
to all commercial banks and the office of the IMF Resident Representative
by the close of business the same day.

16. Governance reform and other structural reforms. In
order to enhance the quality of governance, a Presidential Decree establishing
an audit agency was issued on January 25, 2001. A decree specifying the
charter for the audit agency was issued on February 7, 2001. We intend
to draft in consultation with the staff of the IMF and submit to parliament
and seek adoption, no later than end-June, 2001 a law on the audit agency.
The charter that was recently issued will be amended so that it is consistent
with the law. We intend this law to include provisions for transmitting
reports of the audit agency to parliament and to be consistent with Annex
IV of the Memorandum of Economic Policy of October 2000.

17. Although we did not meet the structural benchmark for introducing
a "black book" mechanism, we are now working with the World
Bank to finalize arrangements for a "black book." The "black
book" mechanism would be introduced as part of the policy conditionality
in the World Bank's second structural adjustment credit.

18. The progress of our farm-restructuring program has slowed because
of the limited capacity of the Land Reform Committee and because of increased
interference from local officials, especially the managers of those state
farms being restructured. In order to accelerate the farm restructuring
process, we have issued a Presidential Decree (#470) on February 2, 2001
announcing the restructuring of an additional 120 state-owned farms into
non-state owned and privately operated farms by end-December 2001. This
is consistent with the overall objectives for land reform described in
our MEP of October 2000, although we realize that the benchmark regarding
land reform that was set for end-December 2000 in this regard was not
met. We agree to an upward adjustment in remaining quarterly benchmarks
under the program and are strongly committed to deepening the reforms
in this area by dividing existing state farms into individual units reflecting
the farmer's land access rights as represented by a "land share certificate."
For state-owned farms already restructured into large dekhan farms, the
right of individual farm households to exit in order to form other dekhan
farms will be fully respected.

19. In order to improve the land reform process, we have upgradedthe status and enhanced the responsibility of the Land Reform Committee.
In order to provide the upgraded committee with an operating mandate,
we will prepare in consultation with the IMF a draft statute outlining
the enhanced responsibilities of the upgraded Land Reform Committee. The
government will approve this statute no later than end-June 2001. Finally
our objective is to eliminate the backlog of undistributed land share
certificates no later than end-July 2001.

20. In October 2000, the MOF and Tajik Rail (TRR) reached an agreement
in principle to compensate TRR for the cost of in-kind debt servicing
provided on behalf of the Government of Tajikistan. A provision of Sm8
million was made for this purpose in the 2001 budget. Havingreached
agreement with Uzbekistan on the arrangements for debt servicing during
2001, the MOF started compensating TRR for the services provided as in-kind
debt servicing. As part of this agreement, TRR has also committed itself
to cash payment for all its tax obligations.

21. While we recognize that our performance in some areas has been disappointing,
as indicated herein we remain fully committed to successful implementation
of our reform program. Accordingly, we have completed several actions
in order to ensure that our program remains fully on track, including
(i) extending coverage of the treasury to include all central government
payments outside Dushanbe; (ii) beginning implementation of the agreement
between the NBT and MOF concerning regularization of their financial relations
as indicated in Annex III of the MEP of October 2000; (iii) limiting the
NDA of the NBT to Sm151 million for end-February 2001; (iv) begin the
process of revoking the banking licenses or of effecting mergers of 2
banks outside the restructuring program that have not met the minimum
capital requirement of US$1 million as of end-December 2000; (v) upgrading
the status and responsibilities of the Land Committee to that of a state
committee; and (vi) beginning implementation of the agreement between
the MOF and Tajik Rail (TRR) of the agreement to compensate TRR for in-kind
services that it will provide to the Government of the Republic of Uzbekistan
on behalf of the Government of Tajikistan in 2001 and ensure the appropriate
amount is included in the budget for 2001.

22. Program monitoring. In order to monitor the implementation
of our economic reform program, our MEP of October 2000 established quarterly
performance criteria, quarterly reviews, and quarterly disbursements.
Annex I presents the quantitative performance criteria for end-June 2001
and the indicative targets for end-September 2001, which incorporates
the revised macroeconomic and financial program. Annex II updates the
structural performance criteria and benchmarks listed in Annex V of the
MEP of October 2000 and establishes structural performance criterion and
benchmarks for end-June 2001. The performance criteria and structural
benchmarks for end-June 2001 are further specified in the revised Technical
Memorandum of Understanding ("TMU") attached to this Letter.
The next program review will center on, in addition to the achievement
of macroeconomic objectives, progress with our structural reforms, with
a particular focus on governance, development of financial markets, bank
restructuring, as well as land and agriculture reform. In aid of transparency,
we hereby request that this letter of intent and the staff report for
the first review of the third annual arrangement under the PRGF be published
on the IMF web site.

23. Due to a technical error in the computation of the performance criteria
for the collection of tax revenue by end-December 2000 and end-March 2001,
we are requesting that a waiver be granted for the non-compliance with
the end-December 2000 performance criterion and that a modification be
made of the end-March 2001 performance criterion. Tax collection for end-December
was Sm49,543 million, which is lower than the minimum level of Sm53,701
million set out in Annex VII to the Memorandum of October 11, 2000 which
mistakenly included grants and non-tax revenues, but is still higher than
Sm48,724 million, which was the level on which the Government and IMF
staff had originally reached understandings. We propose that the performance
criterion (which also mistakenly included grants and non-tax revenues)
for end-March 2001 be modified from Sm94,726 million to Sm80,158 million.
Additionally, we proposed that the end-March performance criteria for
the non-concessional debt be modified to clarify the sources of such borrowing.

24. The Government believes that the policies described above will sustain
our macroeconomic stabilization efforts and strengthen our structural
market reforms, and that they are adequate to achieve the objectives of
our economic program for 2001. We intend to remain in close consultation
with the IMF in accordance with IMF policies on such consultation and
will provide the IMF with any information it requests for monitoring economic
developments and implementation of policies under the program. The Government
stands ready to take any further measures, in consultation with the IMF
staff, which might be necessary to ensure that the overall objectives
of the program can be achieved.

1The March 2001 performance criterion is as in EBS/00/206
while targets for end-June and end-September 2001 are based on actual
data for the fourth quarter in 2000 and revised projections for 2001.2 The December 2000 targets for NIR, NDA, and net credit
to government have been adjusted for the delay in the programmed repayment
to the EU (of US$8 million) and for the less than programmed disbursements
from the AsDB (by US$0.85 million) and the World Bank (by US$0.5 million).3 Numbers are different from EBS/00/206 numbers due to
reclassification of some balance sheet items.4 In October, the NBT wrote off Sm23.2 million in credit
to the government in line with the agreement between the MOF and NBT
on regularization of financial relations between these two organizations.
5 Cumulative since April 1, 2000 up to end-September 2000;
and, cumulative from October 1, 2000 afterwards.6 The performance criteria for end-December 2000 and end-March
2001 were mis-calculated due to a technical error and a waiver is
being requested for end-December and a modification for end-March.
The correct figure for end December 2000 is Sm48.7 million and the
correct figure for end-March 2001 is Sm80.2 million.7 These limits exclude the extension of two government
guarantees to the cotton sector totaling US$83 million. These guarantees
remained effective until end-1999, at which time the guarantees were
called but not enforced as agreed between the government and the creditor.
As of end-December 2000, the total outstanding government guaranteed
debt amounted to US$18.5 million (including accrued interest). The
room remaining under the guarantee will not be used for any additional
external borrowing.

Table 1. Floor on the Cumulative Overall Deficit
of the General Government 1

(In thousands of somoni )

Cumulative deficit from end-September 2000 to:

March 31, 2001 (performance criterion)

14,480

June 30, 2001 (performance criterion)

4,508

September 30, 2001 (indicative target)

14,830

1The March 2001 performance
criterion is based on an accounting exchange rate of Sm1.9=US$1 as
in EBS/00/206 while targets for end-June and end-September 2001 are
revised to reflect actual data for the fourth quarter of 2000 and
revised projections for 2001.

Adjustors

Should the actual financing component of the Public Investment Program
(PIP) exceed the programmed levels, these limits will be adjusted upwards
by the corresponding amount up to a limit of Sm10 million. Thus far such
financing is programmed at zero.

Definitions

The general government budget is defined to include the republican
budget, local (including municipal) budgets, and all extrabudgetary funds
at all levels of general government, including the social protection fund
(SPF). The overall cash deficit of the general government is defined
from the financing side as the sum of the following: (i) the increase
in net claims on the general government from the NBT; (ii) the increase
in net claims on the general government of the rest of the domestic banking
system; (iii) the increase in net claims on the general government
of domestic non-bank institutions and households, including payments to
the Tajik Rail for its servicing the government's external debt; (iv)
the use of proceeds from the privatization of state property; and (v)
net foreign financing of the general government.

(i) Net claims of the NBT on the general government are defined as
all claims of the NBT on the general government (including holdings
of government securities), less claims on the government as regard bank
restructuring, and all deposits of the general government with the NBT,
excluding counterpart deposits of loans received from the World Bank
and from other official creditors, and privatization account where proceeds
from the privatization state property is held.

(ii) Net claims on the general government of the rest of the domestic
banking system are defined to comprise (i) the net asset position arising
from operating balances and current accounts of the general government
with domestic commercial banks; and (ii) the net position of the general
government in regard with other domestic commercial bank assets (loans,
overdrafts, cash advances, holdings of treasury bills or other securities)
and liabilities (deposits, etc.).

(iii) The change in net claims on the general government of domestic
nonbank institutions and households is defined to include net sales
of treasury bills, bonds or other government securities to nonbank institutions
and households (including nonresidents and nonresident financial institutions),
plus any other increase in liabilities of the general government to
domestic nonbank institutions or households. Included in this item are
also compensation payments (-) to Tajik Rail for its servicing external
debt to Uzbekistan.

(iv) Proceeds from the privatization of state property, which are kept
in a separate account with the NBT, are defined as all net receipts
originating from the sale of state property.

(v) Net foreign financing of the general government is defined as the
difference between gross disbursements of foreign financing and amortization
of government debt to foreign financial and nonfinancial institutions,
plus the change in the stock of government counterpart deposits with
the NBT during the period. Foreign financing of the general government
is defined as the increase in claims on the general government of foreign
financial and nonfinancial institutions, excluding the IMF, and including
but not limited to loans received for balance of payments support from
the World Bank's Structural Adjustment Credit and the Asian Development
Bank's Post-Conflict Infrastructure Program Loan.

The augmented deficit of the general government is defined from the financing
side as the sum of the same items as in the definition of the overall
cash deficit of the general government plus the counterparts (-) to increases
in net credits or net claims on the general government from the NBT or
commercial banks as a result of the resolution of the bad loans problem
under the bank restructuring program. These counterparts consist of the
full value of the loans taken over by the government.

Monthly data on net claims of the domestic banking system on the general
government are taken from the balance sheets of the NBT and commercial
banks. The Ministry of Finance shall provide information on, and confirm
the amounts of general government deposits held abroad, disbursements
of foreign loans to the general government, net sales of treasury bills
and other securities, borrowing from the nonbank sector, as well as gross
receipts and expenditures of the central government privatization account.
It shall furthermore provide detailed monthly data on (i) revenues, expenditures
and lending operations of the state and local budgets, as well as all
budgetary and extrabudgetary funds; (ii) quasi-fiscal operations; (iii)
estimates of the outstanding stock of wage and pension and all other domestic
expenditure arrears; and (iv) estimates of the outstanding stock of tax
and other revenue arrears to the general government.

The cumulative net foreign financing projected for the
program period is as follows:

Table 2. Projected Net Foreign Financing of the
Budget 1

(In thousands of somoni)

Cumulative from end-September 2000 to:

March 31, 2001

10,641

June 30, 2001

-3,535

September 30, 2001

5,017

1 The end-March 2001 target
is based on an accounting exchange rate of Sm1.9=US$1 as in EBS/00/206
while targets for end-June and end-September 2001 are revised to reflect
actual data for the fourth quarter of 2000 and revised projections
for 2001.

2. Minimum Levels of Tax Collection of the State Tax and State Customs
Committees 1

Table 3. Floors on the Tax Collection of the STC
and SCC

(In thousands of somoni)

Cumulative revenues from end-September 2000 to:

March 31, 2001 (performance criterion)

80,158

June 30, 2001 (performance criterion)

146,547

September 30, 2001 (indicative target)

197,244

1 The end-March 2001 performance
criterion is based on an accounting exchange rate of Sm1.9=US$1 as
in EBS/00/206. The target has been modified to correct the mistake
in the calculation of the target in EBS/00/206. The end-June and end-September
2001 targets are based on actual data for the fourth quarter of 2000
and revised projections for 2001.

Definitions

Tax collection of the State Tax Committee (STC) and State Customs Committee
(SCC) include all taxes collected by the STC and SCC. Excluded from the
definition of tax collection of STC and SCC are the following: any tax
offsets, in-kind payments, sales taxes on cotton and aluminum exports,
taxes, charges, and fees collected by the Social Protection Fund, any
proceeds from loans, or other banking system credits, the issuance of
securities, or from the sale of state assets. Custom revenues are defined
to include import duties, export duties and taxes, customs duties, exchange
taxes, and other taxes (including VAT) on international trade and transactions.

II. Targets for Monetary Aggregates

1. Limits on the Stock of Net Domestic Assets of the NBT

Table 4. Ceilings on the Stock of Net Domestic
Assets of the NBT

(In millions of somoni)

March 31, 2001 (performance criterion)1

184.7

June 30, 2001(performance criterion)

238.3

September 30, 2001 (indicative target)

207.7

1 The March 2001 performance
criterion is based on an accounting exchange rate of Sm1.9=US$1 as
in ESB/00/206 while end-June and end-September numbers are revised
to reflect actual data for the fourth quarter of 2000 and revised
projections for 2001 based on an accounting exchange rate of Sm2.4=US$1.

Adjustors

The limits will be adjusted downward by 100 percent of the amount by
which actual net foreign financing of the budget exceeds the amount programmed
for (i) debt repayments and (ii) disbursement of external loans for balance
of payments support, including but not limited to the World Bank's Structural
Adjustment Credit and the Asian Development Bank's Post-Conflict Infrastructure
Program Loan. In the event of a shortfall of net foreign financing, the
limits will be adjusted upward, but by no more than the Somoni equivalent
value of US$10 million.

Definitions

Net domestic assets of the NBT are defined as: reserve money
minus net foreign assets of the NBT. Reserve money is composed
of currency in circulation, required reserves, other bank reserves, and
deposits of non-government non-banks with the NBT. Net foreign assets
of the NBT comprise net international reserves in convertible currencies.
The NBT's net domestic assets comprises the following assets and liabilities:
net credit to the general government (excluding counterpart funds), counterpart
deposits of the World Bank, AsDB, EU and other official creditors (-),
privatization account (-), claims on the government with regard to bank
restructuring, claims on banks, credit to the economy, and other items
net (OIN). OIN includes, inter alia, the foreign exchange re-valuation
and capital accounts of the NBT.

1 The performance criterion
for end-March 2001 is based on an accounting exchange rate of Sm1.9=US$1.
Targets for end-June and end-September 2001 are revised to reflect
actual data for the fourth quarter of 2000 and revised projection
for 2001.

Adjustors

The limits will be adjusted upward by 100 percent of the amount by which
actual net foreign financing of the budget falls short of the amount programmed
for (i) debt repayments and (ii) disbursements of external loans
for balance of payments support, including but not limited to the World
Bank's Structural Adjustment credit and the Asian Development Bank's Post-Conflict
Infrastructure Program Loan, up to an amount the lower of (i) the programmed
use of net external financing for the budget as listed in section
I.1, or (ii) the equivalent value of US$10 million. The limits will
be adjusted downward for any write-off of government debt to the NBT.

Definitions

Net credit from the NBT to the general government is defined in section
I.1 above.

3. Net international reserves

Table 6. Floors Under the Stocks of Net Official
International Reserves
of the NBT in Convertible Currencies 1

(In millions of U.S. dollars)

March 31, 2001 (performance criterion)

-45.9

June 30, 2001 (performance criterion)

-52.8

September 30, 2001 (indicative target)

-37.3

1 The March 2001 performance
criterion is as in EBS/00/206 while targets for end-June and end-September
are revised to reflect actual data in the fourth quarter of 2000 and
revised projections for 2001.

Adjustors

The limits will be adjusted upward by 100 percent of the amount by which
actual net foreign financing of the budget exceeds the amount programmed
for (i) debt repayments and (ii) disbursements of external loans
for balance of payments support, including but not limited to the World
Bank's Structural Adjustment Credit and the Asian Development Bank's Post-Conflict
Infrastructure Program Loan. In the event of a shortfall of net foreign
financing, the limits will be adjusted downward, but by no more than US$10
million.

Definitions

Total net international reserves of the NBT are defined as the
difference between total gross international reserves of the NBT and total
reserve liabilities of the NBT. Total gross international reserves
of the NBT are defined as the NBT's holdings of monetary gold, holdings
of SDRs, any reserve position in the IMF, holdings of convertible currencies
in cash or in nonresident banks that are readily available. Also included
are holdings of foreign currency-denominated securities issued by governments
or central banks of OECD member states. Excluded are capital subscriptions
in foreign financial institutions, non-liquid assets of the NBT (with
maturity beyond one year), convertible currency denominated claims on
domestic banks and other residents (if the NBT does not have control over
use of these resources), assets in non-convertible currencies, and foreign
assets pledged as collateral or otherwise encumbered. Reserve liabilities
of the NBT are defined as outstanding IMF credit, and liabilities of the
NBT to nonresidents with an original maturity of up to and including one
year, that are public or publicly guaranteed.

For the purpose of program monitoring, U.S. dollar denominated components
of the balance sheet will be valued at the program exchange rate, and
other foreign currency denominated items will be valued at cross rates
between the program exchange rate of the U.S dollar and current official
exchange rates of the U.S. dollar against those currencies. Official gold
holdings shall be valued at US$265 per troy ounce.

Fund staff will be informed of details of any gold sales, purchases,
or swap operations during the program period, and any resulting changes
in the level of gross foreign reserves that arise from revaluation of
gold will be excluded from gross reserves (as measured herein).

III. Limits on External Debt and Arrears

1. Limits on Short-, Medium-, and Long-Term External Debt

Table 7. Limits on Public and
Publicly Guaranteed External Debt

Cumulative net
disbursements

Cumulative contracting and
guaranteeing of external debt

(In millions of U.S. dollars)

0-1 year
Maturity

1-5 year
Maturity

Total

During the period from end-September 2000 to:

March 31, 2001

0

10

10

June 30, 2001

0

10

10

September 30, 2001

0

10

10

Definitions

The ceilings specified in Table 7 shall apply exclusively
to external debt to the EBRD in the amount of US$9.2 million and to other
creditors in the amount of US$0.8 million. No other non-concessional external
debt is permitted. The contracting or guaranteeing of external debt by
the government of Tajikistan, the NBT, or any other agency acting on behalf
of the government, is understood to mean a current, i.e., not contingent,
liability, created under a contractual arrangement which requires the
obligor to make one or more payments in the form of assets (including
currency) or services, at some future points in time; these payments will
discharge the principal and/or interest liabilities under the contract.
Included are also commitments contracted or guaranteed for which value
has not been received. Debts can take a number of forms, the primary ones
being as follows: (i) loans, i.e., advances of money to obligor by the
lender made on the basis of undertaking that the obligor will repay the
funds in the future (including deposits, bonds, debentures, commercial
loans, and buyers' credits) and temporary exchanges of assets that are
equivalent to fully collaterilized loans under which the obligor is required
to repay the funds and usually pay interest, by repurchasing the collateral
from the buyer in the future (such as repurchase agreements and official
swap arrangements); (ii) suppliers' credits, i.e., contracts where the
supplier permits the obligor to defer payments until some time after the
date on which the goods are delivered or services are provided; and (iii)
leases, i.e., under which property is provided the lessee has the right
to use one or more specified periods of time that are usually shorter
than the total expected service life of the property, while the lessor
retains the title to the property. For the purpose of the program, the
debt is the present value (at the inception of the lease) of all lease
payments expected to be made during the period of the agreement excluding
those payments that cover the operation, repair or maintenance of the
property.

Under the definition of debt above, arrears, penalties, and judicially
awarded damages arising from the failure to make payment under a contractual
obligation that constitutes debt are debt. Failure to make payment on
an obligation that is not considered debt under this definition will not
give rise to debt. Excluded from this performance criterion are two government
guarantees extended to the cotton sector totaling US$83 million which
remained effective until end-1999, when the guarantees were called but
not enforced as agreed between the government and CSFB. As of end-2000,
the total outstanding government guaranteed debt amounted to US$18.5 million.
The room remaining under extended guarantee will not be used for any additional
external borrowing.

External debt limits apply to the net disbursement of short term external
debt (with an original maturity of up to and including one year);
and contracting or guaranteeing of nonconsessional medium- and long-term
external debt (with original maturities of more than one year) with
sublimits on the contracting and/or guaranteeing of such debt with maturities
of up to and including five years.

Short-term debt includes all short-term obligations excluding the reserve
liabilities of the NBT, as defined in section II.3
above and import credits. Debt denominated in currencies other than the
U.S. dollar shall be valued in U.S. dollars at the exchange rate prevailing
at the time of disbursement. Net disbursements of short-term external
debt are defined as net changes in the stock of such debt, i.e., disbursements
of new short-term obligations minus any amortization of existing obligations.

The medium- and long-term debt includes all loans with maturities more
than one year. Debt falling within these limits that are denominated in
currencies other than the U.S. dollar shall be valued in U.S. dollars
at the exchange rate prevailing at the time of contracting or guaranteeing
takes place or at the exchange rate stipulated in the contract.

For the purposes of the program, the guarantee of a debt arises from
any explicit legal obligation of the government or the NBT or any other
agency acting on behalf of the government to service such a loan in the
event of nonpayment by the recipient (involving payments in cash or in
kind), or indirectly through any other obligation of the government or
the NBT or any other agency acting on behalf of the government to finance
a shortfall incurred by the loan recipient.

Concessionality will be based on currency-specific discount rates based
on the OECD commercial interest reference rates (CIRRs). For loans of
a maturity of an original maturity of at least 15 years, the average of
CIRRs over the last 10 years will be used as the discount rate for
assessing the concessionality of these loans, while the average of CIRRs
of the preceding six-month period will be used to assess the concessionality
of loans with original maturities of less than 15 years. To the ten-year
and six month averages of CIRRs, the following margins will be added:
0.75 percent for repayment periods of less than 15 years; 1 percent
for 15-19 years; 1.15 percent for 20-30 years; and 1.25 percent
for over 30 years. Under this definition of concessionality, only loans
with grant element equivalent to 35 percent or more will be excluded
from the borrowing limits. The debt limits will not apply to loans classified
as international reserve liabilities of the NBT, or to loans contracted
for debt rescheduling or refinancing.

IV. Continuous Performance Criteria

1. Continuous performance criterion on new directed credits by the
NBT

The NBT will not issue any directed credits. This performance criterion
will be monitored on the basis of changes in the NBT's balance sheets
supported by the NBT's regular reporting on the results of its credit
auctions, including interest rates, and amounts bid and received.

2. Continuous performance criterion relating to external arrears

No new external arrears shall be accumulated at any time under the arrangement.
External arrears are defined as overdue debt service arising in respect
of obligations incurred directly, guaranteed, or converted into interstate
debt by the government of Tajikistan or the NBT, including penalties or
interest charges.

For the duration of the arrangement, the Republic of Tajikistan will
not: (i) impose or intensify restrictions on the making of payments and
transfers for current international transactions; (ii) introduce or modify
multiple currency practices; (iii) conclude bilateral payments agreements
which are inconsistent with Article VIII of the IMF's Articles of Agreement;
or (iv) impose or intensify import restrictions for balance of payments
reasons.

4. Continuous performance criterion relating to expenditure arrears
of the republican (central) budget and of the Social Protection Fund

No new arrears of the republican budget on wages and of the Social Protection
Fund on transfer payments to its regional offices shall be accumulated
at any time under the arrangement.

For purposes of the performance criterion, expenditure arrears shall
be defined as any shortfall in monthly disbursements on wages and in transfers
from the Social Protection Fund to its regional offices related to the
planned payments. A monthly disbursement plan will be presented to the
Fund staff by the 15th day of the month preceding the month
of actual wage and pension payments.

To permit monitoring as defined above, the government will provide data
on actual wage payments and on transfers from the Social Protection Fund
to its regional offices to the IMF staff in the form of treasury reports
and statements from the Social Protection Fund on a monthly basis no later
than 14 days after the end of each month.

V. Quarterly Indicative Targets

1. Reserve money

Table 8. Indicative Limits on the Stock of Reserve
Money of the NBT

(In millions of somoni )

March 31, 2001 (indicative target) 1

97.5

June 30, 2001 (indicative target)

111.5

September 30, 2001 (indicative target)

118.1

1 The end-March 2001 target
is based on an accounting exchange rate of Sm1.9=US$1 as in EBS/00/206
while targets for end-June and end-September are revised to reflect
actual data in the fourth quarter of 2000 and revised projections
for 2001 based on an accounting exchange rate of Sm2.4=US$1.

Definition

Somoni reserve money of the NBT is defined as the sum of (i) domestic
currency issued by the NBT, (ii) deposits of commercial banks and other
financial institutions held with the NBT, and (iii) deposit liabilities
of the NBT with respect to the public. Deposits of the general government
are excluded from reserve money, but are included under NDA. NBT reserve
money liabilities with respect to commercial banks and other financial
institutions comprise all deposits held by these institutions at the NBT,
including required reserves and excess reserves held in the correspondent
accounts, but excluding NBT liabilities held by commercial banks and other
financial institutions in the form of short term NBT notes. Deposit liabilities
of the NBT to the public include all deposits placed at the NBT, in domestic
or foreign currency, by the nonbank public.

1 Performance criteria
and indicative targets are based on an accounting exchange rate of Sm2.4
= US$1 unless otherwise indicated.2 The change in net credit to general
government in the NBT balance sheet may differ from the amount of NBT credit
to the general government shown in the fiscal accounts as the NBT balance
sheet revalues the stocks of the net general government according to the
program exchange rate.